BP gets its life back

Commentary: Gulf spill penalties lighter than feared

The BP oil spill in he Gulf of Mexico began with an explosion and that eventually resulted in the sinking of the offshore oil rig Deepwater Horizon in April 2010.

SAN FRANCISCO (MarketWatch) – Two years after a deadly combination of incompetence and negligence sank the Deepwater Horizon oil rig, after unleashing the worst oil spill ever in U.S. waters, after nearly going bankrupt, BP got its life back.

It wasn’t cheap. Including the $4.5 billion in penalties and fines it agreed Thursday to pay the U.S. Department of Justice, BP PLC is now on the hook for close to $42 billion for its April, 2010 Gulf of Mexico blowout.

The latest numbers include a record $1.25 billion criminal fine. The company said Thursday’s settlement adds $3.85 billion to the $38.1 billion it has already set aside to cover the cost of the biggest oil spill ever in U.S. waters.

BP also pleaded guilty to 11 counts of felony misconduct and neglect and one count of obstruction of Congress. This surprised a lot of folks, who figured BP would settle without ever acknowledging criminal wrongdoing.

It also surprised a lot of investors. It means BP can put the criminal aspect of this case behind it, a huge relief to BP shareholders. And there are millions of them spanning the globe, from small-time day traders to massive British pension funds.

BP’s
BP, +1.07%
U.S.-traded shares rallied as much as 2% on the news and closed up 0.4% at $40.30. After all, it could have been much worse. This past summer the feds were reportedly aiming for $25 billion in fines. Considering BP booked a $25.7 billion profit last year, $4.5 billion in fines, payable over five years, is not going to break the company.

Survival wasn’t so certain two years ago. The catastrophe cost CEO Tony Hayward his job, for a while it cost shareholders their dividend, anxomd it was a public and political disaster of epic proportions. Ultimately, it hurt the entire offshore oil industry, producing a moratorium on deep-water drilling and tougher regulations.

But BP did survive, and while outstanding civil suits still need to be settled, the market seems confident the worst is over.

Has BP learned its lesson? Hard to say. But if its share price is any indicator, the charts point to a brighter future.

BP shares are up 40% from their lows in June 2010, when the blowout was still spewing crude into the Gulf with no end in sight. That’s roughly in line with Exxon Mobil
XOM, -0.43%
and Chevron’s
CVX, -0.64%
share price performance over the same period, and much better than the 24% Royal Dutch Shell
RDS.A, -1.38%
managed.

So, Tony Hayward, relax. Presumably, by now, you’ve put this mess behind you and got your life back. So has BP.

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